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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
We now would like to start the earnings announcement for the first quarter of the fiscal year 2021. Thank you very much for taking time out of your busy schedule to attend the conference call today. I am Fujiki from the IR office and will be serving as today's facilitator. Thank you for your cooperation.
First, I would like to introduce the attending members today. Representing Member of the Board, Senior Executive Vice President, Mr. Shimada; Senior Vice President, Head of Finance and Accounting, Mr. Nakayama; Senior Vice President, Head of Corporate Strategy Planning, Mr. Taniyama. We have as well other representatives attending. The video of announcement is streamed live on this website. This is -- also will be distributed on demand at a later date, and we ask your understanding.
And after this call, the earnings results presentation, we will have the earnings results announcement of NTT DOCOMO. We would like to seek your attendance as well. Today's presentation materials are posted on our IR website, and please refer to them.
On the first page of the presentation materials, points to be considered as stated. So we would kindly ask you to read them through. After this, Mr. Shimada, Senior Executive Vice President, will explain the overview of the financial results, which will be followed by a Q&A session to take your questions.
Mr. Shimada, the floor is yours.
This is Shimada speaking. So I would like to explain the financial results for the first quarter of fiscal year 2021. I would like to take as many questions as possible. Therefore, for my explanation, I would like to make it brief.
First of all, please look at Page 4. Both revenue and income exceeded expectations. That was the quarter's results. As for the operating revenues, was JPY 2,892.6 billion, up by JPY 126.1 billion year-on-year. Operating income was JPY 486.3 billion, down by JPY 11.3 billion year-on-year. Our profit set a new record high of JPY 340 billion, up by JPY 67.3 billion year-on-year due to the positive impact of bringing in the profit that would have been of minority shareholders by wholly owning DOCOMO.
As for overseas sales, increase compared to the previous year due to the increase in the system integration of NTT DATA revenue by capturing the strong digitalization demand. Overseas operating income margin has improved as a result of higher revenue NTT DATA as well as positive effect of the structural reform initiatives. It was 4.1%, up by 1.9% year-on-year.
Next page, please. I will explain the mobile communications business and the long distance and international communications segment. As for the mobile communications business, though revenues declined due to lower rates, overall had an increase in revenue compared to the previous year due to increase in hard handset sales as well as expansion of smart life business, such as finance payment.
On the other hand, due to enhancing measures for further growth of smart life business and expanding the 5G areas, operating income declined against the previous year. And by continuing the cost reductions for the full year, we are aiming for both increase in revenue and income. As for the long distance and international communications business, there was a special demand for conference revenue last year at NTT Communications, which did not occur this fiscal year, and there was an increase in structural reform expenses at NTT Limited, therefore, both revenue and income are decreased.
And that -- I did skip a lot, but please go to Page 14. In order to improve the capital efficiency and also enhance shareholder return at the Board of Directors meeting held today, and up with the maximum of JPY 250 billion of share buyback was resolved. And also, EPS for the target of this JPY 320 in FY 2022 and full year forecast of the free cash flow and debt repayment for the term has been well considered. And with this EPS target for the FY '21 has been revised to JPY 302 from JPY 300. Our basic shareholder return policy remains the same to increase dividend in a steady manner and also to conduct the buyback in a flexible manner to improve capital efficiency.
That's it from me. Thank you.
Thank you very much. Now we would like to open the floor for question. [Operator Instructions]
[Operator Instructions] Mr. Masuno from Nomura Securities.
This is Masuno speaking. I have 2 questions. The first question is regarding the overall EPS at JPY 320 being achieved ahead of plan and JPY 250 billion of share buyback. And also reviewing the midterm business plan, the EPS and share buyback. The information is coming in separately. This JPY 320 achievement being achieved 1 year beforehand, is it linked to the review of the midterm management strategy? And is that going to link to the share buyback of JPY 250 billion? Can you once again explain in order of each one of them and their relationship?
First of all, regarding the JPY 320 achievement of EPS a year ahead of the plan, I would like to answer that first. Actually, we wanted to put an effort to achieve this year ahead of the plan. When we made the announcement of the last ended fiscal year financial results, this is something that we verbally have conveyed. However, from -- well, as we have been speaking with our investors, if it's not placed in writing, the actual relationship is not clear is what was mentioned to us. That is why we have actually written it down.
So in that sense, the midterm management plans are reviewing the relationship to that, it is not directly related to that. So in that sense, it's just that what we have verbally conveyed to you last time, we have put it in writing as a record.
And furthermore, there's a JPY 250 billion share buyback. This basically, every year, we conduct a share buyback in a flexible manner, and this has been our basic capital policy. So based on this, we have made the decision to conduct the share buyback. So in a sense, this is not directly linked to the reviewing of the midterm management plan. That is all from my side.
I just want to confirm, when there is a review of the midterm management plan, is there going to be more of a detailed EPS target that will be assured?
Yes, probably so.
Okay. Understood. My question is regarding the each segment's performance for the last 3 months. Honestly speaking, there were some business segments that were strongly performing and ones that were not doing so well. They are all mixed up. The regional communications, the IP network and the package and the cost control was done very well. But on the other hand, as you have explained, NTT Limited, the equipment and device sales has gone down due to structural reforms and the personnel expenses went up. Therefore, it seems as the structure reform is not progressing well. So can you explain the background of that?
And for the domestic business, of course, there was a special demand last fiscal year. But within the COVID-19 situation, the digitalization demand is increasing. But within that environment, the revenue has gone down, and that is unfortunate. So how are you looking at this actually increasing? And the mobile communications revenue has remained at JPY 10 billion. Is that intentional? Or can you control that? Can you please explain about that for this quarter?
Thank you very much for your question. This is Shimada speaking. So in the order of how you have asked your question, Masuno, I would like to answer. First of all, regarding NTT Limited. It is a result that is difficult to understand. When there was the forecast that was announced, we were not able to give you the detailed explanation of the structure, and that is probably why it is not clear. However, for this fiscal year's plan, there's 1 major factor.
Throughout the year, the structural reform expense of JPY 28 billion is what we are expecting. The last fiscal year was JPY 8 billion. So compared to the previous year, it has increased by JPY 20 billion. The content of this, in a way, is streamlining the headcount, that's equivalent to 1/3. And also the service migration to cloud and et cetera, that's 1/3, and organizations reforming and integration as -- IT integration is 1/3.
The reorganization is Europe and APAC. Of course, such efforts were made by country. But in addition to that, by region, for example, in Europe, the U.K. and the European continent was managed separately, but that is going to be integrated. And also Australia and Asia region was separately managed, but we are going to manage that as 1 APAC moving forward is what we have started during this fiscal year.
So relatively speaking, in the first half, all of these efforts are concentrated. And by doing so within this fiscal year, about JPY 18 billion increase of profit positive effect will be generated. And from fiscal year 2022 onward, about JPY 23 billion of profit boost effect is what is expected from these efforts.
So for the first quarter, the structural reform expense is JPY 8 billion. Compared to the previous year, it's a JPY 6.5 billion increase. Mainly, the breakdown of this is streamlining. And this is, as you have mentioned, Masuno, is linked to the increase of the personnel expenses.
And in addition to that, last fiscal year, the former Arkadin conference-related services, there was a special demand last fiscal year due to COVID-19. And there's a reaction of about JPY 4 billion. So in total, for the first quarter, JPY 6.1 billion loss as a result. And this time or for this fiscal year, the structural reform expenses, all of that is incorporated. And on a full year basis, JPY 22 billion of operating income achievement is the plan. So up to the second quarter, the structural reform expenses will be recorded. But Q3, Q4, we will recover from that situation is what we are planning now.
And in line with that, if you look at the supplementary material for the financial results, you'll be able to see this. But what is happening for the revenue side or the sales side?
Overall, the high value-added service. Last fiscal year was 39%, but it has increased to 43%. The annual plan is 39%. If you look at the breakdown of the individual high value-added service, data centers and managed services compared to the last fiscal year, they are increasing their revenue of 32% -- about 32%. And as for network, about a 4% decline has occurred. Currently, in a concentrated manner as for the network, we are making proposals. And thanks to that, the -- within the Gartner's Magic Quadrant, within the leader group. So the right top position is where we are for this year. Therefore, in that sense, we were highly evaluated. Therefore, moving forward, we can have high expectations at the network business.
For cloud, as I have mentioned briefly, it is in the midst of service migration. Therefore, after we migrate as a multi-cloud, we would like to grow this business. So for the conventional businesses, we are compressing it. It's about a 10% decline. And regarding the communications, the NTT Communications, Japan domestic business, fiscal year 2020 is the first quarter when there was a declaration of state of emergency. There was the conferences and toll-free number special demand that has occurred. So compared to that, this fiscal year, we have -- we don't have that. So there's a decline of that part. And the last fiscal year, in the fourth quarter, starting with the online classes as a trigger, the system integration demand has occurred. So for fiscal year 2021, that is not going to exist.
So in terms of the revenue increase plan, it is in a small degree. However, as digitalization advances, the solution cloud data network being expanded. And due to that, we are going to put an effort so that we will be able to achieve increase both in revenue and income. And also regarding NTT DOCOMO, at this time, we have not disclosed this, but the plan of -- it's a result that has exceeded the planned figures.
As for DOCOMO, the 5G expansion is done in the plant. And also using the expenses in an advanced manner resulted in the results of -- first quarter financial results.
We, to begin with, had a plan that is going to be a decline in profit. But it has been performing above that plan. And the investment is done in advanced manner more than the fiscal year. And as a result of that, the 5G-related depreciation and retirement expenses and the network usage fee is increasing. So a strategic -- the expenses are used in a strategic way.
The sales-related matters or the finance area within the smart life business, they're using sales expenses. So that is being recorded. And as a result of all this, the 5G networks dedicated spectrum, the base station, DOCOMO and accumulative matter has constructed several 10,000. But the competitors are 1/3 or 1/4 of that. And so the light speed of these stations, DOCOMO is constructing them in an advanced manner.
If that is so, where it says the decline in profit with communications limited and DOCOMO. It was in line or there was an extra?
For NTT Limited, it seems like the number is bad. However, this April, the CEO changed to Abhijit Dubey. But before we enter this fiscal year regarding the plan, we have had thorough discussions and discussed that we need a further streamline and that has been reflected in this current plan. So we are progressing in line as planned. That is same for NTT Communications and limited too. That is all from my side.
And Mr. Ando from Daiwa please.
Ando speaking, can you hear me?
Yes, we can hear you.
I have 2 questions as well. The first question I have, and I was really watching the press conference. And once again, I'd like to really ask the following question. NTT DOCOMO KPIs, subscriber numbers and also the 5G and also -- and the revenue. And as for these 4 factors, well, from the entity holding perspective, well, how do you really evaluate the progress with respect to these KPIs?
Shimada speaking. First of all, with respect to NTT DOCOMO. With respect to ahamo, as has been well mentioned by Mr. Sawada at the press conference earlier and 1.8 million contracts have been really well signed. And so we are thinking that we are making steady progress. More in corporate terms, in terms of ARPU and others, well, there was some perception that ahamo will bring down ARPU, but were actually in the 20 giga. Well, we have this for kind of the upselling. And particularly, with respect to ahamo, approximately half of these people are who in their 30s or below -- or younger. So in that sense, we are really making the well progress or the growth in line with our expectation or in a very well steady manner. And there are some key points and the businesses in smart life domain and particularly finance and settlement or payment related and in the next quarter.
Well, JPY 2 trillion at the wholesales has been achieved. And compared to the previous year, approximately 30% of growth or it has been multiplied by 1.3x. And so going forward, this will finance and payment-related service is expected to grow. And we have already observed this kind of the sign of the potential growth.
So in that sense, well, there are some areas where we were behind those of the competitors. And in order to catch up with them, while cost has been incurred to a certain degree. But those are for the -- well, on the retail outlets, who are really having this kind of businesses, and we are coming closer to the number of those of the competitors. And so we think that the steady growth has been achieved.
As for the churn, we have a slightly worsening trend, but it has been maintained at a relatively low level, and so we are not so much concerned. And that's what we can say about this.
And Mr. Ando, do you have any specific theme that I should cover? And we do have the earnings results announcement from NTT DOCOMO. And so I think we're just -- our brief at the overview could be were just fine.
And the second question. And you have explained the results by segment and the regional communication, I don't think you have made much of the reference to the original communication. I'm looking at the numbers and fixed and voice are the communication revenue, it's not really declining too much. And so it was difficult to understand 100% fully. But as for all regional communication, is there anything that you would like to really mention about the business performance of this segment?
Regional communications. Net adds of the Hikari business -- and the churn has been reduced. So steadily, we are really adding the number of contracts. And particularly, in the last fiscal year because of this remote work environment, and we had a significantly higher level of demand. And so IP package revenue were both for the entity, East and West. And we have seen a substantial growth, which has resulted in a big sort of drive and driver too will increase our revenue and income. And in the Western Japan, NTT West, the contact business, the subsidiary company has seen a significant growth in revenue.
And because of the COVID-19 related, the response by the call centers. And there was the increase in the demand for such. And also the e-books, Solmare. I think this is driven by the demand of the people staying at home. And so these 2 businesses have really made a contribution to our income growth. And the fixed and voice communications related, and we have seen they both decline compared to the last year, and this is for Taniyama, from the corporate strategy planning. And I think there is a difference between the NTT East and West. And the reason why we have the smaller number of all the fixed voice revenue decline in it. And we have some more positive because of the Olympics games. And so because of that, we have some slight difference between NTT East and NTT West.
I'd like to take the next question. SMBC Nikko Securities, Mr. Kikuchi.
This is Kikuchi speaking. Regarding the financial results, all of the questions I wanted to ask was already asked by the previous people. But regarding the management, in the last result announcement held in May onwards, what were the -- things that -- the initiatives that was led by Holdings?
Well, there are some reported in the news like you bought the shares of NEC and there were various things that have occurred, but I haven't seen much this year. So Shimada, what have you been doing is what I would like to know?
Mr. Kikuchi, thank you very much. It's not that I would just day dreaming every day. It's just that, well, there are things that I can share with you, and there are things that I cannot share with you, and there are things that we're doing that we cannot share with you also. In fact, due to the fair study meeting, an ideal way of ensuring fair competition, there are some delays in what we can share with you.
And regarding the discussion of the content itself, it is progressing. At the current situation, when we'll be able to make the announcement? It will all depend on when the report will come out from MIC. So I cannot say anything clearly yet. But we are working on the management that we will not fall behind schedule. So in that sense, from next fiscal year onwards, we would like to make it a way that we will be seeing a sure effect. And questions that we've been receiving from you previously regarding the synergy effect and others, we would like to make it a way that we'll be able to give you a specific explanation, and I kindly ask you to understand that.
The second question is the securitization of the assets. I believe that you were going to actively progress on that. I looked at the briefing session material, but there was not much of a mentioning. So was there not many of activities in the last 3 months?
In each telephone offices, the -- and the telephone on top of the base stations or telephone offices, you were going to carve them out, I believe, can you explain that?
What we have started is that the -- of balancing the data center assets. One, we have already made an announcement in India, in Mumbai. And the Tokyo Century has a 75%. Well, we will collaborate with them for the data center there.
And moving forward within this fiscal year, we would like to make things more clear. So data centers are for balancing, it will be more of a medium-term initiative. And I believe that we'll be able to come to a time that we can give you explanations. And related to data centers, this fiscal year, it's about JPY 130 billion, JPY 140 billion of investment with our own capital, which is in line with the previous years. But for the external capital, we would like to bring in about 1/3 of the required capital from external sources or third-party capital from external sources, which is about JPY 200 billion.
So in total, that amount will be invested in data centers. So there is a demand for data centers. So for the new data centers, we'll bring in the third-party capital. The management and operation of the data centers will be done by NTT, but we will grow in that way. And regarding the existing data centers, we will be managing the data centers, but where it is necessary. Or how should I say this? The data centers that can be of balance, we will off-balance them. In that sense, the structure of the network needs to be considered. And so we will determine which will be kept with us and which will be off-balanced.
And as for real estate and property assets, Urban -- this is related to Urban Solutions Group. And this year, as for selling the real estate, it's about JPY 400 billion of our real estate is planned to be sold. That is because the housing properties, it rotates. But for offices, depending on the area or how are we going to consolidate our locations. Depending on that, we would like to replace the assets or if there are real estate that's better to sell, we will. And we would like to optimize the real estate assets. And also, that's about it.
Tanaka san from Goldman Sachs.
Tanaka from Goldman Sachs. I hope you can hear me.
Yes, we can hear you.
With respect to NTT Limited, I have 2 questions. The very first question. Once again, I'd like to see your view earlier in terms of the restructuring costs and also the effect of the reorganization has been well mentioned. And you are really expecting to have a stronger sort of effect in the next fiscal year. And the restructuring cost and JPY 28 billion in this fiscal year. And after spending this much, well, in the next fiscal year and beyond, do you think this is going to be reduced or do you have to keep that level of the investment? Of course, this is something about the future. But how should we look at the restructuring-related costs?
This is Shimada speaking. To -- as for the restructuring and the structural reform, we have been doing this in the last 2 years. And in that sense, with respect to this scale of the structural reform, we would like to end this by the end of this fiscal year, hopefully.
However, with -- related to IT, and as I have said, for reorganization, if that is being done and we may have to review and that could be required. And so in that sense, rather than develop structure reform by the strategic investment and also some spending might be necessary to a certain degree. And also, as for the new business deployment, and that's something we need to really consider and look into. And the skills of the personnel is really kind of attached to the business itself. And so the human resources might be replaced depending on the business we are to embark upon. But we do not really expect to see the same level of the spending in the next fiscal year. That's our sort of observation.
And the second question, high value-added services is -- were showing a strong growth. And of course, for there is growth well from the rebound of the world COVID-19, and it is not going to continue as it is. But the outlook for the second quarter and beyond. And by product, you have really shown the -- broke the sort of the results by product, but not by region. And if you could just give us some kind of image of how this has been growing.
Shimada speaking, related to data center, there are not much of the regional variances or differences. However, by region, where we see the impact is this year. The areas with a higher impact or the stronger impact from the COVID-19 is affected because while the -- naturally, there is a negative factor for the sales activities and others. And so that has been the sort of the impact.
However, going forward, what we need to reinforce a little more is the U.S. In case of Europe, the U.K. and Germany, where we have bigger markets, and we need to really upgrade our efforts to reinforce the business here. And so -- of course, due to the COVID-19 pandemic impact and also in terms of the market scale. On our part, we do not have higher market share there. And so we would like to really focus on these regions to really accelerate the growth going forward.
We'd like to take the next question. BOA Securities and Mr. Kinoshita.
This is Kinoshita speaking. Can you hear me?
Yes, we can hear you.
I have 2 questions also. The first question is a bit detailed. However, the nonoperating area, the financial income and equity method applied income is improving than the previous year. Is this a onetime effect? Or what is the background of this, is what I would like to know. That is the first question.
This is Nakayama from the accounting, Finance and Accounting. The financial income is a JPY 6.5 billion increase year-on-year. We received the dividend. Last fiscal year, we have acquired the shares of Toyota last year, and we have received dividend from them, those shares. So that's about a JPY 4 billion increase. And also equity method, the Tokyo Century lease we have incorporated their profit. So basically, naturally, organically, these increase are occurring. Yes, that's the correct understanding.
And my second question is you have announced to conduct a share buyback. And in an annual basis, you will do that. But looking at the past track record, I believe that the announcement timing was earlier than the past years. It's up to next March 31. However, do you have any thoughts that you would like to conclude it as soon as possible?
This is Shimada speaking. No, we don't have such intention at all. It's not that we want to do it quickly or as such. No, we don't have that intention. We're just naturally going to conduct the share buyback.
So within the fiscal year, you will be conducting the buyback?
Yes, you're, correct.
So we would like to move on to the next question. Takahashi san from UBS Securities.
I have 2 questions. The first question is with respect to the review of the EPS and the point of clarification. And will the event to make for NTT DOCOMO a wholly-owned subsidiary company. And then automatically, you will have further boosting of EPS by JPY 50. And on -- based upn that the basic starting point is for JPY 320 plus JPY 50 and JPY 370 might be the starting point. And there has been no change in terms of direction to be pursued in the midterm by DOCOMO. And well, can we just take this view or if there is any different way to look at it? What are the factors which are you assuming that you will not be really well in line with that? And basically, the target of FY 2023 is to be reviewed. Is that the right understanding?
Well, as for the review -- and this is Shimada speaking. As for the review, at this point in time, what we are thinking is FY 2023, well, number is to be reviewed. At that point in time, from your side, and while people are -- really were saying that we should have to sell plus JPY 50. But on our part, basically speaking, And this is one of the -- one form of the M&A. And so inclusive of the M&As, where we were saying that the target is JPY 320. So it's not that we could just add JPY 50 on top of the JPY 320. So that's what we would like to really say. But of course, based upon the feedback from your side, we would like to really reflect your views. And as is appropriate timing, we would like to really announce that reviewed numbers.
So may I ask a second question? And well, I'll ask for the PSTN migration. And January 2024 is the timing. And so it is slightly well just into the future. What you are really assuming the potential financial sort of the impact, what should be the potential financial impact from this migration?
Shimada speaking. PSTN migration, financial impact is not really expected to be large. And so basically, within this -- for the depreciation, we will be able to really manage and accommodate. And so it's not that we are to add on anything new on top of this. So we don't expect, well, major financial impact from this. That's our understanding.
And the voice for telephony or the voice communication or long distance communication, the unit price is expected to go down. And also, there could be some impact on your revenue. What do you think of this?
It is exactly true. And so we have seen much of the reduced on a volume-based for rates, and then it is basically based upon the basic rates. And so of course, it is going to be declining. But in our view, it's not going to be a significant impact in any way.
From Crédit Suisse Securities, Mr. Eguchi.
This is Eguchi speaking. I have a question regarding NTT Limited also. This time, you are conducting a structural reform. And probably from next fiscal year onwards, the structural reform expenses will be recorded. Looking at the mid-term operating income margin target. What is the progress?
I was thinking that maybe you are thinking of some additional expenses for the structural reform. But I'm just wondering at what point is it going to get close to what you are expecting? If you can explain it, including the time line -- sense of time line, it will be very helpful.
Thank you very much for your question. Basically, the current structural reforms that we are conducting. And including such efforts, the operating income margin target of 7%, the road to achieving that, we are on track. At today's current timing, conducting the structural reform. Well, in the last 2 years, we have changed the organization. And in a way, we were integrating the companies with subsidiary companies attached to them. So the brand and the organization itself at each country as a unit, the integration process is close to completion. However, in order to deploy the high added value business rather than the just integrated organization, we wanted to make it into a better organization.
And in order to achieve that, we have decided that the structural reform should be conducted this fiscal year. It is difficult for me to say that the process is accelerating. However, at least regarding this fiscal year's planned target. Our understanding is that it has become to one that we'll be able to achieve those targets. And based on that, in fiscal year 2023 we will be achieving 7%, will be the target.
Therefore, for the -- it is one of an important key position in order to achieve the midterm plan for the global business.
And the second point also is regarding the overseas business, including NTT Limited. Well, last year, due to the COVID pandemic, the whole world has changed. And how the companies are investing towards IT has changed too. And I think your company has done a structural reform and a good timing. And I think you're in a phase now that you can actually go with the momentum. And then you did another structural reform and then you changed the management again. So it seems that the governance from the holding company in Japan is that fully being conducted, I thought -- had some concerns regarding that.
Thank you very much for your concern. And this spring, the NTT Limited CEO has changed. And in order to lead this integration, we thought that having Jason taking over, it is easier to integrate. However, in order to go on to the next phase of growth, integration -- from the phase that we put importance on the human relationship, we need to change the talent to people who can overcome if it's to deploy the new business. So we have been selecting the talent in a strategic manner to do so. And thanks to those efforts, NTT DATA for digitalization is the base of the global business. And also, we can say that there's strong demand for the digital services. Therefore, the managed services demand is becoming stronger.
Therefore, as you have mentioned, as the timing for such reform, we were able to do that in a good timing and meaning that changing the human resources and others.
And this fiscal year, we would like to come out with a certain outcome. And if we can bring up the margin to 6%, we will be able to see the next phase of the prospects.
Tsusaka from MUFG, Morgan Stanley.
Tsusaka speaking. I hope you can hear me.
Yes. Please go ahead.
I have 1 question. So far, when the NTT DOCOMO was a separate listed company, and then investors had a very high level of interest in NTT DOCOMO. And now you are integrated and also what NTT DOCOMO is generating in terms of the profit is accounting for about over half. And mobile was the competitive and also the recovery of the limited and the management elements. The contribution ratio of each individual business seems to be getting smaller. So what I'd like to ask you is B2B -- well having the communication B2B shareholders and investors, and more on a broader sense of the management of the NTT Group. What would you like to reemphasize? And on what point you would like to be evaluated? And so I'm supposing that you're really going to be more creative in conducting communication, whether you are satisfied with the way you are having the communication. And of course, our stock price is to be determined by the market. But vis-a-vis the NTT shares? And what are the sort of the factors to drive the investors to really invest in the shares of the NTT. And so what would be the sort of the major -- so the focus point of view of our communication going forward.
As I have said earlier, NTT DOCOMO and NTT Communications to be well integrated and to really will work for the enterprise businesses. And also to enhance the efficiency of the network utilization. I think that could be, well, the extension of the existing mining of the thinking. And I think well Sakasan and others might agree that, that would be the strategy.
And so in that sense, how to really come up with the scope of the new businesses, and that's going to be an important factor. On IR Day, I was really -- I am planning to really well on talk about this. Carbon neutrality has drawn much attention. And on our part, well, last fiscal year, environment vision of NTT Group was announced. And the 30% of the energy consumption will be supplied by the renewable energy in 2030. However, looking at the trend in the society, this wouldn't be sufficient enough.
And so environmental factors is something we should look into. And also on our part, we are engaged in energy businesses and also renewable energy and something like micro grid. What kind of stance should we really would take vis-a-vis this was -- and this is something we are really asked to really come up with some answers. And so our environment vision and to what extent can we consume or use the renewable energy?
And at what point in time can we really achieve the carbon neutrality? And so centering around that axis for how we'll be able to really deploy our energy business. And all in all, I hope that we will be able to really well talk more about what we are going to do on our IR Day. And so in health care business domains and well, different group companies are engaged. And so with the data-driven access, how should we really well organize ourselves and what about the drug discovery and how we'll be able to really develop the businesses. And we would like to really sort out and organize our thinking, so that we will be able to really have the better communication with investors.
It could be a little difficult for us to really provide such information overnight, but I hope that you will wait for us to really present that kind of information at a later date.
Citigroup Securities, Mr. Tsuruo.
This is Tsuruo speaking. I have 2 questions. Many of the questions I wanted to ask has been already asked. So this may be a very minor question, but let me confirm. Is the progress of the cost reduction efforts and the content, it's in the complementary material. And I think the first quarter though was a slow start. But this time, you are planning for JPY 25 billion level of cost reduction, you did do that. And where is this going to come out from? And moving forward, how is the cost going to be improved? I would like to know of your outlook on cost reduction.
This is Shimada speaking. Well, this first quarter's cost reduction, it is the same as the past cost reduction initiatives. Meaning that about 40% with facilities and for the sales-related 40% personnel expense is about 20%. The larger part that is generating that is DOCOMO, from DOCOMO.
Okay. Understood. So for the remaining 3 quarters, I should look at it as what has been done up to now?
Same as what has been done up to now.
Okay. The next question is towers curve out. There was a question already asked regardless from somebody else and West Japan, moving at NTT West. Moving forward, as NTT Holding Company, how would you like to curve out the towers?
I think the capital allocation of the holding company can control it. So I just want to know your thoughts. So with this curve out that happens, we will know about by tower strategy, but I would like to know about your thoughts on this.
This is Shimada speaking. At NTT West tower, we have started the carve-out. But also at NTT East, we would like to consider it. How are we going to treat the DOCOMO part is something that we need to review in specific terms moving forward.
However, 1 major factor is that regarding JTOWER, we are a large investor for them. So currently, the 5G base stations within the new spectrum, we have been already installed ten several thousand.
But moving forward, how are we going to newly construct the base stations, we need to review that first. That is all.
So the pricing, when you do the carving out per tower, if you have any to source out, can you share that with us?
That is difficult to comment.
Moriyuki, SBI Securities.
SBI, Moriyuki.
Yes, we can hear you.
I have 2 questions. And ahamo has been well performing strongly in DOCOMO. And from the group perspective, Well, any change in terms of the request from the holding company to the NTT DOCOMO? And it seems to be -- was somewhat lagging behind in terms of the smart life domain, and that was the sort of the comment made. In what areas do you see that while the NTT DOCOMO needs to really catch up? And also, I think there is going to be the sort of profit or benefits of integration from NTT Communications. And so where are you going to really reinforce the foundation? And any changes? If you could just enlighten me on that?
Shimada speaking. First of all, with regards to ahamo, the effects from ahamo really were significant, I think. And we constantly [ MNP ] has been well negative. And actually, well ahamo has really stopped that trend. And within DOCOMO, the mindset of the employees of NTT DOCOMO. And I would suppose there has been a significant change. So well, they were just thinking that it is really -- we're not sure that we are seeing the sort of decline in market share. But rather -- well, there aren't really well increase in market share. And I think while the ahamo has been really the big factor to enhance the motivation of the employees.
And I think this was still most significant impact. And so within NTT DOCOMO, they're really of mindset and willingness to win against the competition, that has become stronger, which is very important.
And so we really were expecting this to really will come more from the holding perspective. Also, for was smart life business domain. There are some areas where we have the higher profitability, and there are some areas which are not so profitable.
Having said that, in terms of 1 unit of the customer to what would be the sort of the scope of our offering. And from that perspective, whether we should be focusing on center areas? Or should we have more broader scope? And I think while that's something where NTT DOCOMO is really trying to decide. And on a group-wide basis, if we can really support them in identifying that, that would be very well helpful and effective. And so in the very first place, finance and payment area will be the priority area. So we would like to really work together with them for that.
So do you think that there's going to be more of the cost to be incurred for catch-up?
Rather than catch up and all the settlement or payment areas. We are almost becoming the size on par with those of the competitors, but enlarging the scope kind of upfront investment might be required in some cases, and I think this is where they are.
The second question. In the first quarter of the previous year will be case of the COVID-19 and the revenue of JPY 70 billion and also the impact on the income was for JPY 10 billion. That is the impact. And do you see any changes in terms of the impact? Well, is it becoming larger or smaller?
I'm Taniyama from the Corporate Strategy Planning. I'd like to answer to your question. And in terms of revenue, JPY 20 billion impact on revenue, and JPY 10 billion were domestic and JPY 10 billion overseas. And that's for the domestic. Well, the international roaming of DOCOMO and Urban Solutions and hotel conferencing-related revenue. Well, that has resulted in JPY 10 billion impact in overseas, India and Indonesia, because of there was significant impact from the COVID-19, and we have seen decline in SI revenue.
And as for the profit, and that was JPY 7 billion impact. And for that, overseas, basically speaking, where we had minor impact and about the domestic roaming and also real estate, our impact has resulted in this JPY 7 billion. It's not a reversal. But -- and so JPY 90 billion in revenue and also there were JPY 70 billion was the income on a yearly basis. Well this fiscal year, the impact of that is JPY 10 billion of revenue and JPY 7 billion in income. And the JPY 70 billion last year, and we have just for JPY 20 billion. And as operating income, well, we have for just a JPY 7 billion impact this year against the JPY 10 billion next year. So vis-a-vis the previous year, you are having sort of a positive. And so you have JPY 50 billion reversal of the revenue. And so positive of JPY 50 billion and also in terms of income positive JPY 3 billion impact.
[Operator Instructions] There seems to be no further questions. So we would like to conclude the briefing session for the financial results for the 3 months ended June 30, 2021. And we would like to reorganize the briefing session for NTT DOCOMO. Those of you who will be able to attend, we'll please keep your connections. Thank you very much for your attendance. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]